# ASC 310-10-55: Receivables — Overall — 55 Implementation Guidance and Illustrations

Source: FASB Accounting Standards Codification, Basic View

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## ASC 310-10-55: 55 Implementation Guidance and Illustrations

[Read section](https://asc.understandingaccounting.org/asc/310/10/#55-implementation-guidance-and-illustrations)

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##### [310-10-55-1](https://asc.understandingaccounting.org/asc/310/10/#310-10-55-1)

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[Paragraph superseded by Accounting Standards Update No. 2016-13](https://asc.understandingaccounting.org/updates/asu-2016-13/).

##### [310-10-55-2](https://asc.understandingaccounting.org/asc/310/10/#310-10-55-2)

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[Paragraph superseded by Accounting Standards Update No. 2016-13](https://asc.understandingaccounting.org/updates/asu-2016-13/).

##### [310-10-55-3](https://asc.understandingaccounting.org/asc/310/10/#310-10-55-3)

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[Paragraph superseded by Accounting Standards Update No. 2016-13](https://asc.understandingaccounting.org/updates/asu-2016-13/).

##### [310-10-55-4](https://asc.understandingaccounting.org/asc/310/10/#310-10-55-4)

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[Paragraph superseded by Accounting Standards Update No. 2016-13](https://asc.understandingaccounting.org/updates/asu-2016-13/).

##### [310-10-55-5](https://asc.understandingaccounting.org/asc/310/10/#310-10-55-5)

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[Paragraph superseded by Accounting Standards Update No. 2016-13](https://asc.understandingaccounting.org/updates/asu-2016-13/).

##### [310-10-55-6](https://asc.understandingaccounting.org/asc/310/10/#310-10-55-6)

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[Paragraph superseded by Accounting Standards Update No. 2016-13](https://asc.understandingaccounting.org/updates/asu-2016-13/).

##### [310-10-55-7](https://asc.understandingaccounting.org/asc/310/10/#310-10-55-7)

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[Paragraph superseded by Accounting Standards Update No. 2016-13](https://asc.understandingaccounting.org/updates/asu-2016-13/).

##### [310-10-55-8](https://asc.understandingaccounting.org/asc/310/10/#310-10-55-8)

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[Paragraph superseded by Accounting Standards Update No. 2016-13](https://asc.understandingaccounting.org/updates/asu-2016-13/).

##### [310-10-55-9](https://asc.understandingaccounting.org/asc/310/10/#310-10-55-9)

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[Paragraph superseded by Accounting Standards Update No. 2016-13](https://asc.understandingaccounting.org/updates/asu-2016-13/).

##### [310-10-55-10](https://asc.understandingaccounting.org/asc/310/10/#310-10-55-10)

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[Paragraph superseded by Accounting Standards Update No. 2016-13](https://asc.understandingaccounting.org/updates/asu-2016-13/).

##### [310-10-55-11](https://asc.understandingaccounting.org/asc/310/10/#310-10-55-11)

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[Paragraph superseded by Accounting Standards Update No. 2016-13](https://asc.understandingaccounting.org/updates/asu-2016-13/).

##### [310-10-55-12](https://asc.understandingaccounting.org/asc/310/10/#310-10-55-12)

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[Paragraph superseded by Accounting Standards Update No. 2022-02.](https://asc.understandingaccounting.org/updates/asu-2022-02/)

#### Illustrations

##### [310-10-55-12A](https://asc.understandingaccounting.org/asc/310/10/#310-10-55-12A)

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The following Example illustrates the disclosures required by paragraphs

[310-10-50-42 through 50-44](https://asc.understandingaccounting.org/asc/310/10/#310-10-50-42)

. For ease of illustration, comparative periods are excluded.

-   **Entity B**
    
-   The allowance for credit losses incorporates an estimate of lifetime expected credit losses and is recorded on each asset upon asset origination or acquisition. The starting point for the estimate of the allowance for credit losses is historical loss information, which includes losses from modifications of receivables to borrowers experiencing financial difficulty. Entity B uses a probability of default/loss given default model to determine the allowance for credit losses. An assessment of whether a borrower is experiencing financial difficulty is made on the date of a modification.
    
-   Because the effect of most modifications made to borrowers experiencing financial difficulty is already included in the allowance for credit losses because of the measurement methodologies used to estimate the allowance, a change to the allowance for credit losses is generally not recorded upon modification. Occasionally, Entity B modifies loans by providing principal forgiveness on certain of its real estate loans. When principal forgiveness is provided, the amortized cost basis of the asset is written off against the allowance for credit losses. The amount of the principal forgiveness is deemed to be uncollectible; therefore, that portion of the loan is written off, resulting in a reduction of the amortized cost basis and a corresponding adjustment to the allowance for credit losses.
    
-   In some cases, Entity B will modify a certain loan by providing multiple types of concessions. Typically, one type of concession, such as a term extension, is granted initially. If the borrower continues to experience financial difficulty, another concession, such as principal forgiveness, may be granted. For the real estate loans included in the “combination” columns below, multiple types of modifications have been made on the same loan within the current reporting period. The combination is at least two of the following: a term extension, principal forgiveness, and interest rate reduction.
    
-   The following table shows the amortized cost basis at the end of the reporting period of the loans modified to borrowers experiencing financial difficulty, disaggregated by class of financing receivable and type of concession granted (numbers in thousands):
    
-   ![](https://asc.understandingaccounting.org/asc-img/GUID-CE8EBF8B-D75B-4A71-823C-F0F23F578C58-low.gif)
    
    Loan Modifications Made to Borrowers Experiencing Financial Difficulty Interest Rate Reduction Amortized Cost Basis at 12/31/20X1 % of Total Class of Financing Receivable Loan Type Real Estate—Commercial " $40,000 " 2.0% Real Estate—Residential - 0.0 Consumer " 10,000 " 0.2 Total " $50,000 " Term Extension Amortized Cost Basis at 12/31/20X1 % of Total Class of Financing Receivable Loan Type Real Estate—Commercial $- 0.0% Real Estate—Residential - 0.0 Consumer " 22,000 " 0.4 Total " $22,000 " Principal Forgiveness Amortized Cost Basis at 12/31/20X1 % of Total Class of Financing Receivable Loan Type Real Estate—Commercial " $20,000 " 1.0% Real Estate—Residential - 0.0 Consumer - 0.0 Total " $20,000 " Combination—Term Extension and Principal Forgiveness Amortized Cost Basis at 12/31/20X1 % of Total Class of Financing Receivable Loan Type Real Estate—Commercial $- 0.0% Real Estate—Residential " 5,000 " 0.8 Consumer - 0.0 Total " $5,000 " "Combination—Term Extension and Interest Rate Reduction" Amortized Cost Basis at 12/31/20X1 % of Total Class of Financing Receivable Loan Type Real Estate—Commercial $- 0.0% Real Estate—Residential " 5,000 " 0.8 Consumer - 0.0 Total " $5,000 "
    
-   The following table describes the financial effect of the modifications made to borrowers experiencing financial difficulty:
    
-   ![](https://asc.understandingaccounting.org/asc-img/GUID-D173EDAE-8F62-425F-B37C-575E9D9C0F1C-low.gif)
    
    Interest Rate Reduction Loan Type Financial Effect Real Estate—Commercial Reduced weighted-average contractual interest rate from 6% to 3%. Real Estate—Residential Reduced weighted-average contractual interest rate from 8% to 5%. Consumer Reduced weighted-average contractual interest rate from 4% to 1.5%. Term Extension Loan Type Financial Effect Real Estate—Residential "Added a weighted-average 2.4 years to the life of loans, which reduced monthly payment amounts for the borrowers." Consumer Provided six-month payment deferrals to borrowers through our standard deferral program. The six monthly payments were added to the end of the original loan terms of these borrowers. Principal Forgiveness Loan Type Financial Effect Real Estate—Commercial Reduced the amortized cost basis of the loans by $20 million. Real Estate—Residential Reduced the amortized cost basis of the loans by $5 million.
    
-   Upon Entity B’s determination that a modified loan (or portion of a loan) has subsequently been deemed uncollectible, the loan (or a portion of the loan) is written off. Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the allowance for credit losses is adjusted by the same amount.
    
-   The following table provides the amortized cost basis of financing receivables that had a payment default during the period and were modified in the 12 months before default to borrowers experiencing financial difficulty (numbers in thousands):
    
-   ![](https://asc.understandingaccounting.org/asc-img/GUID-B617A162-8110-4710-B0A2-B16E4800E07E-low.gif)
    
    Financing Receivable That Subsequently Defaulted Amortized Cost Basis of Modified Financing Receivables That Subsequently Defaulted Interest Rate Reduction Term Extension Principal Forgiveness Combination- Term Extension and Principal Forgiveness Combination- Term Extension and Interest Rate Reduction Loan Type Real Estate—Commercial " $1,500 " $- $- $- $- Real Estate—Residential - - - - - Consumer 500 " 1,000 " - - - Total " $2,000 " " $1,000 " $- $- $-
    
-   Entity B closely monitors the performance of the loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The following table depicts the performance of loans that have been modified in the last 12 months (numbers in thousands):
    
-   ![](https://asc.understandingaccounting.org/asc-img/GUID-7F7C3A16-6B42-4520-9386-E428F0EE916C-low.gif)
    
    Payment Status (Amortized Cost Basis) Current "30–89 Days Past Due" "90+ Days Past Due" Loan Type Real Estate—Commercial " $55,000 " " $3,500 " " $1,500 " Real Estate—Residential " 6,000 " " 4,000 " - Consumer " 29,000 " " 1,500 " " 1,500 " Total " $90,000 " " $9,000 " " $3,000 "

##### [310-10-55-12B](https://asc.understandingaccounting.org/asc/310/10/#310-10-55-12B)

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A restructuring that results in only a delay in payment that is insignificant is not required to be disclosed on the basis of the requirements in paragraphs [310-10-50-36](https://asc.understandingaccounting.org/asc/310/10/#310-10-50-36) and

[310-10-50-42 through 50-44](https://asc.understandingaccounting.org/asc/310/10/#310-10-50-42)

. This Example illustrates the guidance in paragraphs

[310-10-50-46 through 50-47](https://asc.understandingaccounting.org/asc/310/10/#310-10-50-46)

for determining whether a delay in payment is insignificant. This Example assumes that the debtor is experiencing financial difficulties and is not intended to illustrate the determination of whether a debtor is experiencing financial difficulties.

##### [310-10-55-12C](https://asc.understandingaccounting.org/asc/310/10/#310-10-55-12C)

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A creditor originates a seven-year loan to a debtor. The debt:

1.  a
    
    Has a fixed interest rate
    
2.  b
    
    Is collateralized by commercial real estate
    
3.  c
    
    Requires monthly interest payments
    
4.  d
    
    Requires a balloon principal payment at maturity.

##### [310-10-55-12D](https://asc.understandingaccounting.org/asc/310/10/#310-10-55-12D)

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At origination, the debtor expects to repay the principal by refinancing the debt with the real estate held as collateral. That is, the collateral is the primary source of payment of the debt's principal balance, whether through a refinancing of the debt or a sale of the property. However, before maturity, the fair value of the collateral was less than the principal amount due at maturity, and as a result of market conditions, the debtor is unable to refinance the debt. The debtor plans to sell the property to repay the debt and requests an extension of the debt's maturity date to allow time to liquidate the property. In response to the debtor's financial difficulties, the creditor grants the debtor a three-month extension of the debt maturity date. At the time that this extension was granted, the debtor had not yet identified a buyer for the collateral.

##### [310-10-55-12E](https://asc.understandingaccounting.org/asc/310/10/#310-10-55-12E)

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The restructuring results in a delay in payment that is not insignificant. Although the delay in timing of payment is insignificant (relative to the frequency of payments due, the debt's original contractual maturity, and the debt's original expected duration), the creditor expects a significant shortfall in cash flows relative to the contractual amount due when the property is sold because the property is the sole source of repayment.

##### [310-10-55-12F](https://asc.understandingaccounting.org/asc/310/10/#310-10-55-12F)

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A restructuring that results in only a delay in payment that is insignificant is not required to be disclosed based on the requirements in paragraphs [310-10-50-36](https://asc.understandingaccounting.org/asc/310/10/#310-10-50-36) and

[310-10-50-42 through 50-44](https://asc.understandingaccounting.org/asc/310/10/#310-10-50-42)

. This Example illustrates the guidance in paragraphs

[310-10-50-46 through 50-47](https://asc.understandingaccounting.org/asc/310/10/#310-10-50-46)

for determining whether a delay in payment is insignificant. This Example assumes that the debtor is experiencing financial difficulties and is not intended to illustrate the determination of whether a debtor is experiencing financial difficulties.

##### [310-10-55-12G](https://asc.understandingaccounting.org/asc/310/10/#310-10-55-12G)

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A debtor obtains a 30-year mortgage loan that requires monthly principal and interest payments. In year 4, the debtor experiences financial difficulties and misses two payments. On the basis of the debtor's financial hardship, the debtor and the creditor agree on a forbearance arrangement and repayment plan. Under the terms of the forbearance arrangement and repayment plan, the creditor agrees not to take any foreclosure action if the debtor increases its next four monthly payments such that each payment includes one fourth of the delinquent amount plus interest. The agreement does not result in the creditor charging the debtor interest on past due interest. At the end of the forbearance arrangement, the debtor will:

1.  a
    
    Have repaid all past due amounts
    
2.  b
    
    Be considered current in relation to the debt's original terms
    
3.  c
    
    Have resumed making monthly payments set out under the debt's original terms.

##### [310-10-55-12H](https://asc.understandingaccounting.org/asc/310/10/#310-10-55-12H)

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The restructuring results in a delay in payment that is insignificant. At the time of the forbearance arrangement, the creditor expects to collect all amounts due for the periods of delay. Furthermore, the length of delay resulting from the forbearance arrangement is considered insignificant in relation to the frequency of payments due, the debt's original contractual maturity, and the debt's original expected duration.

##### [310-10-55-12I](https://asc.understandingaccounting.org/asc/310/10/#310-10-55-12I)

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A restructuring that results in only a delay in payment that is insignificant is not required to be disclosed on the basis of the requirements in paragraphs

[310-10-50-42 through 50-44](https://asc.understandingaccounting.org/asc/310/10/#310-10-50-42)

. This Example illustrates the guidance in paragraphs

[310-10-50-46 through 50-47](https://asc.understandingaccounting.org/asc/310/10/#310-10-50-46)

for determining whether a delay in payment is insignificant. This Example assumes that the debtor is experiencing financial difficulties and is not intended to illustrate the determination of whether a debtor is experiencing financial difficulties.

##### [310-10-55-12J](https://asc.understandingaccounting.org/asc/310/10/#310-10-55-12J)

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A commercial debtor has a revolving line of credit with a creditor with an original term of five years. The terms of the line of credit require interest payments every 90 days on the average daily balance of the line. As the line of credit nears maturity, the debtor and creditor begin renegotiating the terms of a new line of credit. Because of a temporary cash shortfall due to a delay in collections from two key customers, the debtor is unable to make the final interest payment before the two parties finish renegotiating the terms of the new line of credit. The terms of the renegotiated line of credit are expected to be similar to the current line of credit, which are comparable to terms available to debtors with similar risk characteristics. The creditor expects the debtor to recover quickly from this temporary cash flow shortage. Accordingly, the creditor extends a 3-month payment deferral by adding the missed interest payment to the balance of the line and requiring the debtor to make its first interest payment 90 days after the new line of credit is finalized, or 180 days after the due date of the missed interest payment.

##### [310-10-55-12K](https://asc.understandingaccounting.org/asc/310/10/#310-10-55-12K)

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The restructuring results in a delay in payment that is insignificant. Although the debtor is unable to make the contractual payment at the time it is due, thereby resulting in the three-month deferral, the creditor still expects to collect all amounts due, including interest at the contractual rate. Furthermore, the delay in timing of payment represents only one payment cycle under the terms of the line, which is insignificant relative to the frequency of payments due, the debt's original contractual maturity, and the debt's original expected duration.

##### [310-10-55-13](https://asc.understandingaccounting.org/asc/310/10/#310-10-55-13)

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This implementation guidance addresses the meaning of the term [financing receivable](https://asc.understandingaccounting.org/glossary/f/#financing-receivable "A financing arrangement that has both of the following characteristics: It represents a contractual right to receive money in either of the following ways: On demand On fixed or determinable dates. It is recognized as an asset in the entity's statement of financial position. See paragraphs 310-10-55-13310-10-55-14310-10-55-15 for more information on the definition of financing receivable, including a list of items that are excluded from the definition (for example, debt securities).").

##### [310-10-55-14](https://asc.understandingaccounting.org/asc/310/10/#310-10-55-14)

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All of the following are examples of financing receivables:

1.  a
    
    Loans
    
2.  b
    
    Trade accounts receivable
    
3.  c
    
    Notes receivable
    
4.  d
    
    Credit cards
    
5.  e
    
    Receivables relating to a lessor's right(s) to payment(s) from a [leveraged lease](https://asc.understandingaccounting.org/glossary/l/#leveraged-lease "From the perspective of a lessor, a lease that was classified as a leveraged lease in accordance with the leases guidance in effect before the effective date and for which the commencement date is before the effective date.") that should be recognized as an asset in accordance with paragraphs [842-10-65-1(z)](https://asc.understandingaccounting.org/asc/842/10/#842-10-65-1)
    
    1.  1
        
        [Subparagraph superseded by Accounting Standards Update No. 2016-02](https://asc.understandingaccounting.org/updates/asu-2016-02/).
        
    2.  2
        
        [Subparagraph superseded by Accounting Standards Update No. 2016-02](https://asc.understandingaccounting.org/updates/asu-2016-02/).
        
    3.  3
        
        [Subparagraph superseded by Accounting Standards Update No. 2016-02](https://asc.understandingaccounting.org/updates/asu-2016-02/).
        
6.  f
    
    [Lease receivables](https://asc.understandingaccounting.org/glossary/l/#lease-receivable "A lessor's right to receive lease payments arising from a sales-type lease or a direct financing lease plus any amount that a lessor expects to derive from the underlying asset following the end of the lease term to the extent that it is guaranteed by the lessee or any other third party unrelated to the lessor, measured on a discounted basis.") arising from [sales-type leases](https://asc.understandingaccounting.org/glossary/s/#sales-type-lease "From the perspective of a lessor, a lease that meets one or more of the criteria in paragraph 842-10-25-2 and is not an operating lease in accordance with paragraph 842-10-25-3A.") or [direct financing leases](https://asc.understandingaccounting.org/glossary/d/#direct-financing-lease "From the perspective of a lessor, a lease that meets none of the criteria in paragraph 842-10-25-2 but meets the criteria in paragraph 842-10-25-3(b)and is not an operating lease in accordance with paragraph 842-10-25-3A.").

##### [310-10-55-15](https://asc.understandingaccounting.org/asc/310/10/#310-10-55-15)

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None of the following meet the definition of financing receivables:

1.  a
    
    [Debt securities](https://asc.understandingaccounting.org/glossary/d/#debt-security "Any security representing a creditor relationship with an entity. The term debt security also includes all of the following: Preferred stock that by its terms either must be redeemed by the issuing entity or is redeemable at the option of the investor A collateralized mortgage obligation (or other instrument) that is issued in equity form but is required to be accounted for as a nonequity instrument regardless of how that instrument is classified (that is, whether equity or debt) in the issuer's statement of financial position U.S. Treasury securities U.S. government agency securities Municipal securities Corporate bonds Convertible debt Commercial paper All securitized debt instruments, such as collateralized mortgage obligations and real estate mortgage investment conduits Interest-only and principal-only strips. The term debt security excludes all of the following: Option contracts Financial futures contracts Forward contracts Lease contracts Receivables that do not meet the definition of security and, so, are not debt securities, for example: Trade accounts receivable arising from sales on credit by industrial or commercial entities Loans receivable arising from consumer, commercial, and real estate lending activities of financial institutions.") within the scope of Topic 320 (see the guidance beginning in paragraph [320-10-15-5](https://asc.understandingaccounting.org/asc/320/10/#320-10-15-5))
    
2.  b
    
    Unconditional promises to give (for example, contributions receivable) that should be recognized as an asset in accordance with paragraphs
    
    [958-605-25-7 through 25-15](https://asc.understandingaccounting.org/asc/605/958/#605-958-25-7)
    
3.  c
    
    Both of the following instruments, which are within the scope of Subtopic 325-40:
    
    1.  1
        
        A transferor's interests in securitization transactions that are accounted for as sales under Topic 860
        
    2.  2
        
        Purchased beneficial interests in securitized financial assets.
        
    
    For related guidance, see paragraph 325-40-15.

##### [310-10-55-16](https://asc.understandingaccounting.org/asc/310/10/#310-10-55-16)

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[Paragraph superseded by Accounting Standards Update No. 2016-13](https://asc.understandingaccounting.org/updates/asu-2016-13/).

##### [310-10-55-17](https://asc.understandingaccounting.org/asc/310/10/#310-10-55-17)

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[Paragraph superseded by Accounting Standards Update No. 2016-13](https://asc.understandingaccounting.org/updates/asu-2016-13/).

##### [310-10-55-18](https://asc.understandingaccounting.org/asc/310/10/#310-10-55-18)

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[Paragraph superseded by Accounting Standards Update No. 2016-13](https://asc.understandingaccounting.org/updates/asu-2016-13/).

##### [310-10-55-19](https://asc.understandingaccounting.org/asc/310/10/#310-10-55-19)

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[Paragraph superseded by Accounting Standards Update No. 2016-13](https://asc.understandingaccounting.org/updates/asu-2016-13/).

##### [310-10-55-20](https://asc.understandingaccounting.org/asc/310/10/#310-10-55-20)

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[Paragraph superseded by Accounting Standards Update No. 2016-13](https://asc.understandingaccounting.org/updates/asu-2016-13/).

##### [310-10-55-21](https://asc.understandingaccounting.org/asc/310/10/#310-10-55-21)

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[Paragraph superseded by Accounting Standards Update No. 2016-13](https://asc.understandingaccounting.org/updates/asu-2016-13/).

##### [310-10-55-22](https://asc.understandingaccounting.org/asc/310/10/#310-10-55-22)

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[Paragraph superseded by Accounting Standards Update No. 2016-13](https://asc.understandingaccounting.org/updates/asu-2016-13/).